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    Published on: February 19, 2021

    Amid all the devastation and heartbreak in Texas, there were stories of kindness and generosity.  At one Austin-area H-E-B, there was a tale of uncommon compassion that many would say is common to the iconic Texas retailer.  KC reports.

    Published on: February 19, 2021

    On a day when Walmart said that its Q4 total sales were up 7.4 percent and online sales were up 69 percent, the retailer said that it would raise its average hourly pay above $15.

    The Wall Street Journal writes:  "The big-box retailer’s goal is politically significant because it aligns with President Biden’s proposal to raise the federal minimum wage to $15 an hour from the $7.25 an hour that has been in place for 11 years. It also comes from the nation’s largest private employer, with stores located in different labor markets across the country.

    "But Walmart’s announcement Thursday isn’t an endorsement of Mr. Biden’s plan, which is part of a $1.9 trillion Covid-19 relief proposal by Democrats in Congress expected to pass the House later this month. The company supports a higher federal minimum wage, but not $15 an hour. While it plans to raise pay for 425,000 hourly workers from an average above $14 in January 2020, its minimum starting wage would remain at $11 an hour."

    Walmart also said yesterday that it lost $2.09 billion during the quarter, compared with last year's $4.14 billion profit during the same period.  But the company said that this could be attributed to its costs related to its sale of Asda in the UK and 85 percent of its Seiyu division in Japan, as well as coronavirus-related expenses.

    Yahoo Finance has an analysis suggesting that what should really worry Walmart's competitors is its "aggressive $14 billion capital investment plan for 2022. If that number is hit, it would mark a roughly $4 billon year-over-year increase from 2020. It would be the most capital Walmart has invested in its business since it spent $13.5 billion in calendar year 2011 … For a company really no longer building U.S. super centers and going gangbusters with international store expansion, the year-over-year increase is significant and indeed stands out. The way Walmart puts it, the large sum of money will be used to take its business operations to the next level to support the future of consumption."

    The Journal adds:  "The real potential for a company like Walmart comes from how much more profit it can juice from a slow-growing revenue base. And things look pretty promising on that front. Fueled by Walmart’s e-commerce growth, advertising revenue nearly doubled last year and Walmart said Thursday that it should be a multibillion-dollar business in the near future … Walmart is a gigantic, reliable machine. It may not move fast, but even the small changes it is making today can alter the course of profitability dramatically."

    KC's View:

    If indeed Walmart's traditional business model can be seen as mature, it seems clear that current leadership is intent on broadening out the model - via things like c-commerce and using its existing businesses as advertising platforms - that will allow it to continue to grow … and crush smaller competitors.

    Which means that it is more important than ever for most of those competitors to identify the things that Walmart cannot and will not do, and invest in those differential advantages.

    The more money Walmart makes in other businesses, the more it can invest in driving prices lower.  Which means that competing with Walmart on price is increasingly problematic.

    Published on: February 19, 2021

    Reuters reports that a coalition of lobbying groups - including one that represents Amazon, Facebook and Google - is suing the state of Maryland over a newly imposed tax on digital advertising revenues, calling it "a punitive assault on digital, but not print, advertising. It is illegal in myriad ways and should be declared unlawful and enjoined."

    The tax was imposed last week by the Maryland legislature, where lawmakers voted to override a veto by Gov. Larry Hogan.

    The story says that the law "covers companies with global digital ad revenues of at least $100 million. Supporters have said it is aimed at the largest platforms like Amazon, Facebook, and Alphabet’s Google."

    According to Reuters, "The Chamber, the largest U.S. business group; the Internet Association, which represents dozens of tech companies; the Computer & Communications Industry Association; and NetChoice filed suit in U.S. District Court in Maryland seeking an injunction to block the new tax," which proponents believe could generate as much as $250 million in annual revenue.

    Reuters points out that this could be a harbinger of taxes to come, since other states are considering similar changes to their tax laws.

    KC's View:

    Generally, I think that it is a mistake to single out one segment for taxation and not others … but on the other hand, internet platforms were happy when they were excluded from having to pay the same sales taxes that their bricks-and-mortar had to pay.  Being treated differently allowed online businesses to get a lot of traction, and so it seems a little disingenuous to say they shouldn't be treated differently now.

    Published on: February 19, 2021

    The Wall Street Journal writes that the US Department of Labor yesterday reported that "worker applications for unemployment benefits rose during the first half of February, pausing a downward trend that pointed to an improving labor market amid other signs that the economic recovery is picking up.

    "The Labor Department on Thursday said the increase to 861,000 last week was accompanied by a 55,000 upward revision of claims in the prior week, on a seasonally adjusted basis. That put the four-week moving average, which smooths out week-to-week fluctuations, at 833,000, slightly lower than the prior week and near the top of a roughly 750,000 to 850,000 range since last October."

    The Journal notes that there are "signs of stepped-up growth in the new year. On Wednesday, the government said retail sales, a measure of purchases at stores, restaurants and online, jumped a seasonally adjusted 5.3% in January from a month earlier, helped by pandemic-related federal stimulus payments distributed to households at the start of the year. Manufacturing output also has neared pre-pandemic levels."

    “It’s fair to say that with rising caseload, the job market has stalled,” said Augustine Faucher, chief economist of the PNC Financial Services Group, tells the Washington Post.  “The job market will get better. With a big jump in retail sales and cases falling significantly and vaccine distribution, the jobs should start to rebound in the spring. But I think things are going to be pretty dicey in the next few months.”

    KC's View:

    Any economic recovery is likely to be good for most retailers, though the consensus seems to be that any recovery is going to be gradual … since it is going to take time to put an end to the pandemic, it is going to take time for the economy to reach pre-Covid levels.

    Published on: February 19, 2021

    Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  The United States now has had 28,523,524 total confirmed cases of the Covid-19 coronavirus cases, resulting in 505,309 deaths and 18,703,421 reported recoveries.

    Globally, there have been a total of 110,914,701 confirmed coronavirus cases, with 2,454,290 resultant fatalities, and 85,858,990 reported recoveries.  (Source.)

    •  The Washington Post reports that "at least 42.3 million people have received one or both doses of the vaccine in the U.S.  This includes more than 16.4 million people who have been fully vaccinated … 73.4 million doses have been distributed."

    •  From the Wall Street Journal this morning:

    "Hospitalizations in the U.S. due to Covid-19 continued to decline and newly reported cases were at levels last seen in late October, though weather conditions are affecting vaccination efforts in some parts of the country … A total of 62,300 Covid-19 patients were hospitalized in the U.S. as of Thursday, the sixth day in a row the figure has been under 70,000, according to the Covid Tracking Project. The number of people needing treatment in intensive-care units because of the disease also declined, to 13,045, the lowest level since Nov. 12.

    •  From the New York Times:

    "With vast swaths of the United States pelted by heavy winter storms that brought Covid-19 vaccinations to a near-halt over the past week, health officials say a daunting task has become even more difficult.

    "But not impossible.

    "'We’re going to just have to make up for it: namely do double-time when this thing clears up,' declared Dr. Anthony S. Fauci."

    According to the story, "The brutal winter weather delayed the delivery of hundreds of thousands of doses across the country just as vaccine distribution was beginning to gather steam in the United States. Part of the problems is that the storms affected a FedEx facility in Memphis and a UPS facility in Louisville, Ky. — both vaccine shipping hubs.

    "Shipment delays have been reported in California, Colorado, Florida, Illinois, Nevada, New Jersey, Ohio, Oregon, Utah and Washington, among other states, forcing vaccine sites to temporarily shutter and coveted appointments to be rescheduled.

    "In Texas, where millions of residents lost power during the powerful storm, a delivery of more than 400,000 first doses and 330,000 second doses was delayed. A portion of those shots, roughly 35,000 doses of Pfizer’s vaccine, were sent to North Texas providers on Wednesday, but shipments will continue to depend on safety conditions."

    •  The Washington Post has a piece about continuing frustration at a lot of supermarkets and drug stores that have been administering coronavirus vaccines in their pharmacies, but have not yet been able to innoculate their own employees, despite their being labeled as "heroes" and "essential."

    "The nation’s 3 million grocery workers lag other essential workers when it comes to vaccine priority," the Post writes.  "Just 13 states — including Maryland, Virginia, California, New York and Pennsylvania — have begun inoculating such employees as the broader vaccine rollout is hampered by widespread delays, according to the United Food and Commercial Workers International Union, which represents 800,000 U.S. grocery employees."

    The workers have a point - and to my mind, it underlines the degree to which all the talk about essential-ness was just lip service.  (Though, to be fair, in a lot of cases lip service accompanied by bonuses and temporary pay increases.)  But there also are only 28 states where teachers currently are included in the groups being vaccinated.

    The good news is that there seems to be general agreement that in just a few weeks there will be a lot more supply, and so it will be possible to open things up a bit.  I'd love it if states would allow retailers that are doing vaccinations to dedicate an hour or two a day during which they could focus on their employees.

    •  USA Today reports that "CVS Health plans to contact Americans living in underserved communities to help them schedule COVID-19 vaccine appointments amid signs that white people are getting the free vaccine at higher rates than Black Americans.

    "The drugstore chain said Friday that it will call, email and text-message people living in what the federal government has deemed socially vulnerable areas to provide assistance and education in the vaccine process … CVS also said it will hold vaccine clinics in the most vulnerable communities it serves and send vaccination caravans into neighborhoods to make it easier for people to get their shots."

    •  The Washington Post has a story about how "global vaccination efforts were set to get a boost Friday as Western governments and pharmaceutical companies pledged doses and funds to help poorer nations step up immunization campaigns.

    "The announcements came ahead of a Group of Seven meeting of leaders of the world’s largest economies and amid wider concerns about growing vaccine inequality that experts warn could prolong the pandemic."

    The US is expected to commit $4 billion to the effort, which is being administered by the World Health Organization (WHO).

    •  The Wall Street Journal reports that "the Ivy League Council of Presidents announced Thursday that it would not attempt to stage spring sports in 2021 due to the coronavirus pandemic, making it the only conference in the NCAA’s Division I that remains completely on the sidelines for the fourth consecutive season … Throughout the coronavirus pandemic, the Ivy League has been quick to act and slow to change its stance on athletics. The conference was the first to cancel its men’s and women’s basketball tournaments in March 2020, about three days before the rest of the sports world ground to a halt."

    Published on: February 19, 2021

    •  The Wall Street Journal reports on how "small-business formation is surging in the U.S., and e-commerce company Shopify Inc. has been reaping the gains of that business boom.

    "More Americans are opening online stores and selling goods and services to make money as the effects of the pandemic have wiped out jobs and disrupted in-person activities like dining and shopping. The shift has brought a wave of new business to Shopify, which sells subscription services that enable people to put up websites, accept online payments, and ship and track orders to customers.

    "But Shopify’s business model carries risks. Analysts expect the surge in e-commerce that drove much of the company’s growth to taper as the pandemic ebbs."

    The story goes on to point out that "small businesses are vulnerable during downturns, and they have suffered during this one. Some 30% fewer small businesses were open at the end of the 2020 than at the start of that year, according to data-tracking and software firm Womply. For Shopify, a number of the new businesses using its services may not last long - a risk to the tech company’s growth."

    •  The Puget Sound Business Journal reports that Amazon seems poised to open a new grocery store in Ballard, Washington, in a location formerly occupied by a New Seasons store.

    According to the story, the format is  a mystery:  The Ballard location "is a 25,000-square-foot store. That is about twice the size of its largest Amazon Go store, which is 10,400 square feet located in Capitol Hill … However, an Amazon Fresh store that opened in Irvine, California, last year was about 40,000 square feet."  

    Published on: February 19, 2021

    •  From CNN:

    "If you've shopped at Walmart recently, you may have noticed more employees snaking through aisles, carrying blue tote bins and picking items off shelves to be delivered, either curbside at stores or to customers' homes.

    "The employees are called personal shoppers - and their ranks are skyrocketing. Walmart  says it now has more than 170,000 of these workers in stores, more than double the number in the position last year and larger than Macy's entire workforce.

    Published on: February 19, 2021

    •  Bloomberg reports that "the head of Conagra Brands Inc. expects demand to remain elevated for some - but not all - packaged food after the pandemic subsides.

    "The grocery mainstay, with brands such as Vlasic pickles and Duncan Hines baking mixes, is investing in its manufacturing capabilities for products likely to stay in demand, according to Chief Executive Officer Sean Connolly. While some canned goods, for example, will likely tail off, he said categories such as frozen vegetables and snack foods are still going strong."

    "Frozen is in the midst of a renaissance," Connolly says.

    One category that saw a surge in sales during the pandemic that Connelly does not  expect to continue - canned pasta, such as the Chef Boyardee brand.

    “We’re not sitting here today expecting Chef Boyardee, as an example, to have one of these significantly higher burn rates post-pandemic,” Connolly tells Bloomberg. “But when we look at frozen, when we look at snacking, we do.”

    The comments came as The American Frozen Food Institute (AFFI) and FMI—the Food Industry Association released the second Power of Frozen report, noting that "frozen foods are a pandemic powerhouse ringing in $65.1 billion in retail sales in 2020, a 21% increase compared to a year ago."

    Published on: February 19, 2021

    Yesterday we took note of an Oregonian report that Kroger-owned Fred Meyer is getting some grief  after a dozen police officers stopped local folks from taking food that had been thrown away.  The food had been tossed because the store's power went out, and the store called the police, managers said, because of concerns that people might contract food-bone illnesses.

    I commented:

    Maybe the better solution would've been to find a way to take the food to a homeless shelter or soup kitchen, rather than just throwing it out.  But sometimes, like during winter storms that create enormous stress, people make short-term decisions that they later realize might've not been the best idea.  

    One MNB reader responded:

    Your suggestion to give the food to a homeless shelter or a soup kitchen shows that your heart is in the right place, but the decision is ultimately dictated by the locale’s health department officials and it is issued without exception.   They do not want to risk having products knowingly being served to an already vulnerable population that could expose them to a food-borne illness.   Granted, there are times that health officials will go to extremes by making you throw away factory-sealed packages of product that should still be okay for consumption by someone, but a health department will always err on the side of caution for any potential consumer in any circumstance.  

    A number of years ago I had a power outage in a store that was caused by a nearby train pulling a large crane on a flatbed which struck the overhead power lines.   We were without power for several hours and within 30 minutes of our electricity being restored I had a visit from the county health department.   Because we had managed to close off our frozen food aisle (which was all in upright cases with doors), the official allowed us to go without pulling any product.   Our fresh meat case products were deemed to be safe because we had quickly pulled all the cases and moved the contents into walk-in coolers.

    Unfortunately, we had lots of open-air refrigerated cases and the same person forced us to empty much of our dairy cases, as well as all our cured meats and cheeses, among other things.  We were warned in no uncertain terms that we were to immediately move all the product to dumpsters and that the work would be done under the supervision of the same health department employee to ensure that nothing was diverted elsewhere for any other use.   Needless to say, we disposed of thousands of dollars of products and had no insurance to cover such a loss.   Once the product ended up behind the store, we had people who attempted to help themselves to it… was only at that point that the health department official said that no more need be done as it was clear that the intent on the part of the store was to throw the product away.  

    Another MNB reader wrote:

    Early on prior to my career in the food industry I always wondered why stores would thrown out tons of food.  Then I started working in this industry and my eyes were opened, unfortunately.  In the store I worked in, we would donate bread, dented cans, anything that had some remaining value to local churches and charities.  Then someone got sick, and sued the store.  All the donations stopped.

    Among those that want the food donated are also among the first to cry foul when someone gets sick.  Why then would a retailer and or manufacturer lay themselves open to, what potentially could be, a huge lawsuit and bad publicity? 

    Me, I would rather take the bad press and keep my company (s) out of the courts. The decision to toss the food rather than donate was a sound one. 

    We had an Eye-Opener yesterday about Jim McIngvale, the owner of Gallery Furniture who is known as "Mattress Mack," who opened his furniture showroom to people in need, offering them shelter and allowing them to sleep on the couches and beds on display in the facility.

    Fox News pointed out that McIngvale did the same thing in 2017 "when he helped Texans who were left homeless by Hurricane Harvey."

    One MNB reader responded:

    There is more to Mattress Mack than great hospitality to the homeless.

    Mattress Mack won $6,000,000.00 betting on Tampa Bay to win the Super Bowl.  It was not really a bet but more like a hedge against his Super Bowl promotion.

    If you spent $600.00 or more at his store before the Super Bowl and Tampa Bay won you purchase price would be refunded.  Now that’s a promotional eye opener.

    Wow.  I bet on Tampa.  I won $1.

    MNB reader Rich Heiland wrote:

    Living just north of Houston I have watched Mac for a long time. He is a real far right guy politically but he transcends that. Even Democrats like Mac and get a kick out of him. And, he doesn't talk community, he is community. Mac steps up constantly. It doesn't take a mega-event like a hurricane or winter storm. He jumps into much smaller, local crises. And, he's fun to watch from a business standpoint. He has sales before the Super Bowl where people can pick winners, point spreads and if they hit, their purchase is free. Of course, folks probably don't know he buys insurance against a certain level of loss but it's still fun and crazy.

    I got a number of emails about this story yesterday, with one pointing out that Mac is a big believer in second chances - he has hired felons and ex-cons, who work next to retired academics and former FBI agents.

    It sounds like Mac understands the importance of a strong narrative.

    Got this email from MNB reader Bob Samples:

    Kevin, I found your interview with Carl Jorgensen very compelling. I am startled you have never been on a farm though.  You need to get onto the soil soon. When I started at Hormel in 1981 the first thing they did was have us sales and marketing hires go ride with the hog buyers and visit farms and see where our food was grown and see their commitment to sustainable quality farming.  It really made a difference in my POV.

    But more importantly I agree with Carl that we need to care for our soil, our crops and animal stocks in a way that is sustainable and not dependent on chemicals and overly technical. Shorten the ingredients list, increase the nutritional density and even get less non renewable plastics out of the system.

    Trust me, once pandemic restrictions are lifted I suspect I'll be visiting a number of farms - I got a bunch of invitations yesterday after that piece was posted.

    Which is great.  I'm a sucker for a learning experience.

    Yesterday, MNB took note of a Bloomberg story about how Nate Faust, described as a "former Walmart logistics expert," is rolling out "a delivery service called Olive that consolidates orders from fashion labels including Michael Kors, Coach and Stuart Weitzman. Olive will gather items from more than 100 brands at its two hubs, where boxes will be recycled while the goods are sent on to consumers at no extra charge in a reusable container … Faust 'acknowledges that it will take longer for buyers to receive their orders. But he’s betting that the affluent, frequent shoppers who drive the majority of online fashion purchases won’t mind waiting a few extra days to get all their purchases in one tidy package, with no boxes to slice open. Unwanted items can be returned in the same tote at their doorstep'."

    One MNB reader responded:

    I would hope that Amazon would consider this as an option versus immediate delivery  My recent experience - I ordered four books and two pairs of slacks (same brand) through Amazon  in one order. Over the next week, the items arrived in six separate deliveries, meaning six separate packages  That meant a large amount of unnecessary packaging and vehicular pollution  Not exactly the carbon footprint they speak of having.

    We had a piece the other day that pointed out how Amazon came to dominate the economies of many communities where it has opened distribution centers.  Prompting MNB reader Howard Schneider to write:

    Like the bad old days. You know, that place where the old song says, "I owe my soul…"

    For those not old enough to get that reference, I submit to you a song by Tennessee Ernie Ford that was an enormous hit in 1955-56:

    Published on: February 19, 2021

    Today's entry in our continuing series of author interviews is Mark Greaney, who is just out with "Relentless," the tenth in his series of "Gray Man" novels.

    "Relentless" was the first "Gray Man" book that I've read, and I'm happy to report that it is a fast-paced ride from start to finish … so compelling that as soon as I finished it I downloaded the first in the series, "The Gray Man," tore through that one, and now am into the second in the series.  In our conversation, Greaney talks about how the pandemic has changed his workflow and research habits, explores how a character arc evolves from book to book, explains the challenges in making an assassin the main protagonist of a novel, and even talks a bit about the little movie that is being made based on the first book.

    I hope you enjoy my conversation with Mark Greaney.

    "Relentless" is available from Amazon, iconic independent bookstore Powell's, and wherever books are sold.

    That's it for this week.  Have a good weekend … I'll see you Monday.

    Stay safe.  Be healthy.